Expectations for the holiday season
Photo 27846324 | Holiday Retail Season © Jackbluee | Dreamstime.com
An air of caution is extending across the holiday season as retailers’ commentaries from recent earnings announcements suggest a season of later shopping and promotions focused on selling events such as Black Friday and Cyber Monday.
The holiday season, November 1 – December 31, is often seen as a make-or-break period for retailers. According to the National Retail Federation (NRF), overall holiday sales in November and December have averaged about 19% of total retail sales over the last five years, but the figure can be higher for some retailers.
Holiday retail sales estimates from consulting firms range from no change from last year to between 3% and 7% growth from the 2022 holiday season.
“Retail sales are expected to increase even as higher prices continue to create a battle for consumer spending. A sharp rise in spending on services post-pandemic shows signs of leveling off since last year, and compared to pre-pandemic levels, spending on durable goods remains high,” said Nick Handrinos, vice chair, Deloitte LLP, and U.S. retail, wholesale, and distribution and consumer products leader in a statement.
According to a PWC survey, 75% of consumers are looking for deals as part of their effort to counteract price increases. Most will do the bulk of their shopping in early November, while some will hold out for Black Friday sales.
Allbirds CEO Joey Zwillinger told analysts this week, “As we approach another holiday selling season with consumers exercising caution around spending, we are prepared for an early and highly promotional holiday period industry-wide and prioritize getting inventory to a healthy position in early 2024 with an elevated pace of unit sales through 2023. We intend to remain competitive on price with reduced marketing spend.”
Salesforce also observed consumers looking for more deals this holiday season and expects global discount rates to rise to 19% in October and peak at 29% during Cyber Week.
While many retailers and brands expect more promotions during the holiday season, some expect consumers to shop later in the season.
“As we look out to the holiday period, while the current consumer environment remains complex and discretionary consumer spending remains pressured, we believe that consumers will be more inspired to shop for the holidays, and as we witnessed a year ago, we anticipate that they will shop later in the period,” 1-800-Flowers Senior Vice President, Treasurer and CFO, William Shea told analysts on November 2.
“We think the holiday will be late-breaking and heavily deal-reliant. So, we're taking the necessary steps to position our portfolio for continued share growth, exiting the year with momentum for our brands and ensuring our inventory health is back to historical norms. Hasbro CEO, Chris Cocks, told analysts in October.
A CNBC survey found that 67% of logistics firms said that products being moved into stores this holiday season are more promotional, lower-cost items into the store and 83% indicated that they are not moving more higher-priced items.
However, GXO Logistics CEO Malcolm Wilson told analysts during the company’s latest earnings call, “We're not expecting to see many of the seasonal pop-up types of short-term warehousing activities that we've seen in previous years. We think that's a consequence of inventory levels generally normalizing and how many of our customers are approaching the holiday season. We've seen that several of our customers are choosing to focus on holding price vis-à-vis a kind of volume type of environment.”
Inventories and consumer spending a toss-up
As we enter the holiday season, high inventory levels remain a concern for a smaller group of retailers compared to last year, while others have become more cautious in ordering new goods. How promotional retailers will become to unload any remaining excess inventories remains to be seen, but retailers will need to be careful and watch their financial numbers or run the risk of missing financial goals.
Meanwhile, trying to understand the typical consumer has become more difficult due to economic and financial data points such as inflation, credit card usage, student loan debt, and more. While many of these data points point to a possibility of lower retail sales, retail sales this year have remained surprisingly resilient, and the question from many economists is how much longer consumers are willing to spend.
- Cathy
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I wear a number of hats these days. Catch my twice-a-week column on air cargo, freight forwarding, the express markets, and the occasional podcast on Air Cargo Next. I’m also helping out the Reverse Logistics Association as a research manager, and at JOC, I help out as a research analyst and write a weekly LinkedIn newsletter, Freight Forward, summarizing JOC & other published articles and providing an outlook for the week ahead.